My deposition was taken in a Massachusetts case and there are some answers I would like to change, can I make changes and how are changes made?

11 October 2013

Yes, you can make changes to correct typographical and transcription errors, and in Massachusetts, you can make substantive changes as well, even if the changes are clarifying or contradictory.  Smaland Beach Assoc., Inc. c. Genova, 461 Mass. 214, 228 (2012).  The changes are to be made in the form of an “errata sheet” that typically appears at the end of the transcript, although you may use your own form.  The right to make changes is not absolute and can be waived prior to the deposition.  Typically the parties establish a deadline for the submission of an errata sheet, which is usually 30 days.  However, there are a number of considerations one should undertake before making any changes through an errata sheet.

Making changes to deposition testimony through the use of an errata sheet is tricky business.  In the Smaland Beach case, the Massachusetts Supreme Judicial court established rules for the use of errata sheets provided for by Mass. R. Civ. P. 30(e).  Understand, that to say it straight, the use of an errata sheet can create suspicion and has the potential for abuse.  This is why the author believes the SJC took the opportunity in 2012 to enunciated some rules. 

 

Initially, any changes “must represent [the deponent’s] own good faith belief, and may not to be undertaken to simply to bolster the merits of a case.”  Smaland Beach Assoc., Inc. v. Genova, 461 Mass. 214, 229-30 (2012).  Procedural requirements must be followed, which include also providing reasons for the changes that “provide an adequate basis from which to assess their legitimacy.”  Id.  at 230.

There are also a few “remedial measures” the SJC adopted.  Id.  If changes are substantive and they likely would have triggered further inquiry, the other party can reopen the deposition to inquire about the changes.  Id.  Judges can also put the costs of reopening the deposition on the deponent as well, “where fairness requires.”   Id. at 230 fn. 25.  Also, the original answers remain part of the record.  Id. at 230.  This means the deponent can be asked about those changes at a later date.  In addition, if the rule allowing errata sheets has been exploited, such as for strategic gain, an attorney can be sanctioned.  Id.  As with any deposition, there can be additional considerations to take.

The bottom line is that if a deponent wants to make a change through an errata sheet, it is recommended to be done carefully, should be thought through, and with the advice of counsel.  In the event you are involved in litigation in Massachusetts and seek advice on this or a similar subject, feel free to give us a call.

I am interested in filing a chapter 11 to keep my business going, what does it cost?

2 August 2013

Quick Answer: A lot.  The filing fee is $1,046.00, administrative costs will likely be thousands, and one can expect to pay five figure amounts in attorneys’ fees.  Further, there are costs that can be unexpected that make a precise estimate impossible, one which is discussed below, but first, a brief introduction.

Frequently small business owners face temporary setbacks where they believe a reorganization may be a good move.  However, in the long run, many of these businesses either find a way to carry on or simply go out of business.  One reason is the complexity, costs, and obligations that come with a chapter 11 reorganization.

One obligation of the debtor in a chapter 11 will exemplify this point.  It is the concept of an entity, often a creditor, to be entitled to its expenses (from the bankruptcy estate – yes that is you small business) for its “substantial contribution” to the case.  Although the definition of and what constitutes a “substantial contribution”  is subject to differing interpretations, the basic gist is that if an entity can show that it incurred expenses in order to benefit the case that it did not incur to serve its own interests and there indeed was a demonstrated benefit to the case, then the entity is entitled to its reasonable expenses.  The specific statute permitting this is 11 U.S.C. 503(b)(3)(D) which reads:

Allowance of administrative expenses

 . . . .
    (b) After notice and a hearing, there shall be allowed administrative expenses . . . including –

 . . . .

(3) the actual, necessary expenses,  . . .  incurred by –

                         . . . .

(D) a creditor, an indenture trustee, an equity security holder, or a committee representing creditors or equity security holders other than a committee appointed under section 1102 of this title, in making a substantial contribution in a case under chapter 9 or 11 of this title;

As you can see, these administrative expenses are only permitted after “notice and hearing,” which means the bankruptcy court must approve them.  However, even though there is some protection in the fact that the bankruptcy court must approve these expenses, the concept of having to pay another entity’s expenses, even if they were incurred presumably to benefit the case, can be difficult for a small business to accept, especially one that is experiencing financial difficulty.  Thus, a small business should not rely on the prospect of reorganization for its business turnaround until it realizes all that is involved in taking this path.

In the event that you own or run a small business and are seeking input on whether the bankruptcy code can provide the help you need, feel free to give us a call.

Massachusetts Department of Revenue, penalties, interest, and payment allocation.

13 July 2013

Benjamin Franklin said “the only things certain in life are death and taxes.”  Although we know there are more things certain that can be added to that list, we must concede that paying taxes is indeed one of them.  In dealing with the tax man, many find themselves being assessed an unpaid tax and penalties and interest that flows from it.  

In this case, there is a subject that the taxpayer may want to look at — payment allocation.  In years past, directing a partial payment to the tax itself instead of the penalties and interest that flowed from it would result in a reduction in the total amount paid.  The taxpayer’s power to direct partial payments was established when the Massachusetts Supreme Judicial Court found that if a taxpayer directs partial payments to the tax itself and the payment is accepted, it must be honored, absent statutory authorization.  Commissioner of Revenue v. Molesworth, 408 Mass. 580, 583 (1990).  So, at that time when a taxpayer was faced with the situation of not having enough money to pay the Massachusetts Department of Revenue and sought to make a partial payment, designating the partial payment for the tax itself, and not the penalties or interest that flow from it, saved in the long run. See e.g., Commissioner of Revenue v. Molesworth, 408 Mass. 580, 583 (1990); Massachusetts Department of Revenue, Technical Information Release 91-2.

Before getting excited about finding a great way to save yourself taxes, there is another saying that applies — “all good things come to an end.” It did here, and soon.  The Massachusetts legislature changed the law and allowed the computation of interest on both the tax and penalties on 1 January 1993.  It also effectively ended the benefit of directing a partial payment generally ended because the total tax would not be reduced by this practice. Massachusetts Department of Revenue, Technical Information Release 92-6.  Also (now that it generally does not matter) it appears that the Massachusetts DOR voluntarily decided to apply partial payments to the tax first.  Id.

In any event, in complex situations, there may still be reasons a taxpayer would still want to allocate partial payments in a manner he desires.  These will be addressed below, but first, there is an important trap for the unwary to avoid.  It is to follow the regulations concerning allocation of payments found at 830 CMR 62C.33.1(8). The Massachusetts DOR now requires the use of Form TDP-1 or a letter containing specific required information to accompany the payment.  Id.  Thus, if payment allocation is desired, you must follow these rules.

Directing payment allocation may still be immensely beneficial if multiple tax years and tax types are owed.  But if the taxpayer does not make the direction, the Massachusetts Department of Revenue makes the call.  New regulations establish this.  For example, absent specific instructions of payment allocation from the taxpayer, the Massachusetts Department of Revenue has significant latitude to apply payments as it desires that can be avoided. 830 CMR 62C.33.1(9)a (“In the absence of written taxpayer instructions given in the manner provided in 830 CMR 62C.33.1(8), the Commissioner may apply a taxpayer's payments to its outstanding liabilities in any manner.”) 

In addition, the Massachusetts DOR has outlined a payment application order that benefits it, instead of the taxpayer.  See e.g., 830 CMR 62C.33.1(9) (indicating order of application of payments in absence of taxpayer direction).  In some situations, it is better for the taxpayer to have certain tax types paid before others or have recent taxes paid instead of other older tax obligations.  In these situations, allocating payment could change the way the Massachusetts DOR would have applied it and bring great benefit to the taxpayer.  So, although some of the power and benefit of payment allocation has been eliminated in Massachusetts, it still may make a significant difference and benefit to the taxpayer to direct allocation of payments.

In closing, it is always best to make your tax payments on time, however, if you do get behind, consider employing payment allocation.  Further, if you are facing such a question, you probably need legal counsel.  Feel free to give this office a call.

Corporate sales taxes, personal liability, and the Massachusetts Department of Revenue.

11 July 2013

Business owners who are behind on paying their corporate sales taxes may find themselves in a big mess. Generally, these amounts are considered to be held in trust for the Commonwealth.  Should corporations fail to pay these sales taxes, the Commonwealth is able to collect the amount due from the officers of the company who are responsible for their collection and payment.  Mass. Gen. Laws c. 64H § 16.  These corporate officers are also personally obligated for the interest and penalties that stem from overdue corporate sales taxes as well.  Berenson v. Commissioner of Revenue, 413 Mass. 831, 832 (1992).  This applies even if the corporation has gone out of business.  Id.   This means that if the sales taxes are not paid by the corporation when due, it can haunt the corporate officer responsible for their payment for years into the future.

If such a situation arises, there could be significant conflict between those that ran the corporation, as people may have different opinions about whether the responsibility for the taxes coincide with the “fault” for not paying them.  In the event that you find yourself in such a situation or need advice on what to do with old corporate sales tax debt, feel free to give this office a call. 

How long do I have to bring my legal claim to court?

1 July 2013

This is a common question and one that has the typical legal answer, it depends.  The author herein recommends a comprehensive approach to this type of question.

  

Initially, let’s point out that we must back up and ask whether there is a claim to being with.  Typically a person answers this question, without much, if any, professional help.  At best, they have called and talked to an attorney, usually over the phone, and obtained what they believed was the correct answer, which is almost always, yes.  They did not have the attorney review any documents related to the issue and presented a one-sided story of the facts.  Further, human nature being what it is, an attorney, especially one that has just “met” the client, may be reluctant to tell the caller there is no claim.  Although with a very simple set of facts a proper assessment can be made in one phone call, often this approach is risky as many times there is not enough investigation into the facts or law that could apply.

Assuming there is a claim, the next question that needs to be answered is: What kind of claim is it?  And the last question: what statute of limitations applies? 

There are broad categories that most lawyers can recite readily, such as tort (generally 3 years in Massachusetts), unfair business practices (generally 4 years in Massachusetts), and contract (generally 6 years in Massachusetts).  However, these broad categories, are just that — broad — and an attorney less familiar with the facts or possible claims can easily mistakenly place a claim into one of these broad categories and miss a more specific and applicable limitation.  Not only that, it may not be abundantly clear in the law.

For example, in Crocker v. Townsend Oil Company the plaintiffs brought a case arguing that they were employees and not independent contractors and thus were entitled to compensation for overtime pay.  Crocker v. Townsend Oil Company, Inc., 464 Mass. 1 (2012).  One question was whether the general 3 year limitation in the Wage Act or a 2 year limitation period a different statute governing overtime claims applied to the specific overtime claims brought by the plaintiffs.  Crocker v. Townsend Oil Company, Inc., 464 Mass. at 6.  This caused the court to have to compare the statutes.  It decided that a plaintiff could bring a claim for hours worked within the 3 years, but if successful, the recovery would be limited to the regular hourly rate and not the enhanced overtime rate.  Crocker v. Townsend Oil Company, Inc., 464 Mass.  at 7.

As you can imagine, the set of facts that existed in Crocker, even though not all that complicated, would not be adequately addressed with a simply phone call.  Even if both statutes were considered, it would take formulating a formal legal opinion to allow a plaintiff to assess the claim properly.

The author suggests that if you find yourself assessing a claim, instead of relying on free advice obtained over the phone, to formally engage and compensate an attorney to answer the proper questions; and further, make the decision whether to pursue the claim without delay.